Mgmt 423 Midterm Study Guide.docx - Chapter 1 A Purchasing...

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Chapter 1. A. P u rc h asi n g a n d S upp ly M a n a g e m e n t a. Purchasing and Supply Management 21 st Century i. The early 21 st century has brought new challenges in the areas of sustainability, supply chain security, and risk management. ii. In large supply organizations, supply professionals often are divided into two categories 1. Tacticians who handle day-to-day requirements 2. The strategic thinkers who possess strong analytical and planning skills iii. The future will see a gradual shift from predominantly defensive strategies, resulting from the need to change in order to remain competitive, to aggressive strategies, in which firms take an imaginative approach to achieving supply objectives to satisfy short-term and long-term organizational goal. iv. v. b. Supply and Logistics definition i. Logistics : logistics management is that part of supply chain management that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services, and related information between the point of origin and the point of consumption in order to meet customers’ requirement. (includes inbound, outbound, internal, and external movements) 1. Major logistics activities: customer service, demand forecasting/planning, inventory management, logistic communications, material handling, order processing, packaging, parts and service support, plant and warehouse site selection, purchasing return goods handling, reverse logistic, traffic and transportation, and warehouse storage. ii. Supply : is a systems approach to managing the entire flow of information, materials, and services from raw materials suppliers through factories and warehouses to the end customer. 1. Supply influences a number of logistics-related activities, such as how much to buy and inbound transportation.
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2. ISM defines supply chain management as “the design and management of seamless, value-added processes across organizational boundaries to meet the real needs of the end customer. The development and integration of people and technological resources are critical to successful supply chain integration. 3. Concepts: a. Stage of development and/or sophistication b. The industry in which they operate c. Competitive position c. Size of Organization’s Spend i. PowerPoint notes: 1. Supply area largest single category of spend 2. North America $18 Trill) 3. Supply: 50-85% of Revenue 4. Honda: 80% of cost of car is purchased cost 5. Outsourcing has increased percentage of spend 6. Service organization highly labor intensive spend 30% 7. Manufacturing firms spend 65% 8. Financial impact on organization ii. Dollars spent with suppliers as a percentage of total revenues is a good indicator of supply’s financial impact. iii. d. Profit-Leverage Effect calculation i. The profit-leverage effect of supply savings is measured by the increase in profit obtained by a decrease in purchase spend.
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